LONDON: Brent oil sank to a new two-year low underneath $90 per barrel, hit by plentiful supplies and the weak global demand outlook, traders said.
At 1620 GMT, Brent North Sea crude for delivery in November fell to $89.90, striking the lowest level since June 25, 2012. The contract later stood at $90.29, down $1.09 from Wednesday.
Earlier this year, European benchmark Brent had peaked at $115.71 in mid-June, but has since slumped on the back of abundant supplies, tepid demand and the strong dollar.
“Most if not all of the recent news flow has been price-negative, with demand forecasts being revised lower while supply continues to rise,” said Saxo Bank analyst Ole Hansen.
“Supply gains are being posted by both the US and among OPEC members who continue to produce more than their stated target of 30 million barrels per day.”
In recent months, the market has faced a raft of downgrades to growth forecasts for global oil demand.
Mounting economic concerns in China and the eurozone have also sparked stubborn worries over demand for crude.
At the same time, buoyant supplies in the US — boosted by surging shale energy production — have dimmed US demand for oil.
Added to the picture, geopolitical concerns in major energy-producing regions like Iraq and Ukraine have failed to cause major disruptions to global oil supplies.
“I don’t think the market’s found it’s bottom yet, evidenced by the severity of the drop we’ve seen the last couple of days,” said Gene McGillian at Tradition Energy in Stamford, Connecticut, who predicts a low of $88 for Brent and $85 for WTI.
Since the price rout began Sept. 30 Brent has been technically oversold, showing a Relative Strength Index of below 30 on the charts. It has lost more than 8 percent of its price in just nine days and is down about 16 percent from a June peak.
“Supply is strong, inventories are high and demand in Europe is terrible,” said Michael Hewson, head analyst at CMC Markets.
Germany, Europe’s No. 1 economy, in August experienced its largest plunge in exports since the height of the financial crisis, data showed, prompting heavy cuts to growth forecasts.
and fueling debate on whether Berlin was doing enough to prop up the country and the rest of the euro zone.
On Wednesday, data on US crude inventories showed a bigger-than-expected build of 5 million barrels in the week to Oct. 3. Analysts polled by Reuters had just expected a 1.5 million barrel rise.
Outside of the euro zone and the US, analysts in a Reuters poll forecast that soft domestic demand in China probably slowed imports, investment and retail sales in the No. 2 economy to multi-month or multi-year lows in September. The poll raised questions about whether policymakers should do more to fight the economic slowdown.
Even so, some analysts said the selloff may be overdone.
Brent oil price dives to new two-year low under $90
